Opec agrees tentative oil cut, waits for Russia to commit

OPEC has apparently agreed to a tentative deal to cut oil output but has not yet come up with a final figure. That's according a delegate at the meeting which is underway in Vienna.

EUROPE (REUTERS) - It's one of the most difficult meetings Opec has had.

Oil prices have been falling but the normal response - to cut production - has been complicated by the killing of Jamal Khashoggi by Saudi Arabia.

President Trump favours lower prices and Opec's de facto leader can't afford to upset him too much. An agreement to cut was reached quickly according to one delegate. But not by how much - although Saudi spoke of accepting 1 million barrels per day prior to the meeting.

Mr Khalid Al Falih, Saudi Energy Minister said: "We believe that there is substantial volumes out there as a result of the recent spare capacity that needs to be withdrawn and we hope that we will come to an agreement where all producers will contribute with an equal cut across the board."

But Opec could fail to reach a deal at all if no compromise is found with non-Opec Russia. Delegates say Moscow should contribute 150,000 barrels to a 1 million barrel reduction and if Russia's willing to cut by 250,000 barrels then Opec might go to 1.3 million.

"The likelihood is that they will cut crude production rate, maybe not as dramatically as some people would like, to try and meet a balance between what the US would like and their own personal interests," said Mr Spencer Welch, Director of Oil Markets, IHS Markit said.

Talks between Russia and Saudi are not happening until Friday (Dec 7) - making investors nervous. Anything less than a cut of 1 million barrels will be below expectations. And all the while prices keep falling - as stocks are also hit by new trade tensions. Brent crude futures on Thursday morning were down another 5 per cent to below US$59 (S$80.78) per barrel.